The Hyundai Accent, one of the models that the car-maker advertised as having lower emissions than was true.
Photograph: Mary Altaffer/AP

Hyundai and Kia have agreed to pay $100m (£62m) in fines and forfeit $200m in credits for misleading customers about the fuel economy of more than a million cars sold in the US.

Monday’s fine for the South Korean car-makers is the largest in the 50-year history of the Clean Air Act, and could set a precedent for Ford and other car companies audited for similar practices.

Hyundai and Kia agreed to the fines after the Environmental Protection Agency (EPA) and the Justice Department found the car-makers had misled consumers about fuel economy and greenhouse gas emissions on several models, including the popular Accent and Elantra.

After fuel prices spiked in 2008, Hyundai gained a marketing edge by claiming that its cars got 40 miles per gallon in highway driving. The inflated fuel economy claims involved about 1.2m vehicles, about a quarter of the 2011-2013 models sold in the US, the EPA found.

“Hyundai and Kia gave consumers inaccurate information about the real-world fuel economy performance of many of these vehicles,” the EPA said in a statement on Monday.

The agency said the car-makers chose the most favourable results, rather than the average, when processing test data, inflating fuel economy by one to six miles per gallon. They understated greenhouse gas emissions of their fleets by about 4.75m metric tons over the estimated lifetime of the vehicles.

The company claimed at the time that engineers running the tests had made mistakes. They lowered the claims, and offered compensation to car owners for the extra fuel costs.

Under the agreement, the EPA said the companies accepted an audit of the 2015 and 2016 models, and to overhaul test protocols before its 2017 models come to market.

The companies will also give up 4.75m carbon credits. Those credits had allowed Kia and Hyundai to go on selling the big gas-guzzling models that remain popular with American consumers. The EPA said they were worth more than $200m.

The EPA’s Gina McCarthy and US attorney general Eric Holder announce the fine for the car-makers. Photograph: Evan Vucci/AP

David Zuchowski, Hyundai’s chief executive in the US, said in a statement: “Hyundai has acted transparently, reimbursed affected customers and fully cooperated with the EPA throughout the course of its investigation.

“We are happy to put this behind us.”

Since the 2012 audit of Hyundai, the EPA has taken a closer look at other car company claims. Ford, Mercedes-Benz and other companies have reduced mileage claims for some models after EPA audits.

“Businesses that play by the rules shouldn’t have to compete with those breaking the law,” the EPA administrator, Gina McCarthy, said on Monday. “This settlement upholds the integrity of the nation’s fuel economy and greenhouse gas programs and supports all Americans who want to save fuel costs and reduce their environmental impact.”

In June, Ford admitted to overstating mileage claims and agreed to compensate owners for extra fuel costs. The company said the initial mileage claims were a mistake.